Examining How One-Size-Fits-All Regulations Affect Community Banks and Credit Unions
WASHINGTON – Today, Chairman Steve Chabot (R-OH) and the Committee on Small Business held a hearing to examine how red tape and bureaucracy affect community banks and credit unions. Specifically, Committee Members examined a Government Accountability Office (GAO) report that identified a number of financial regulations that hurt smaller financial institutions.
“The local community bank and the neighborhood credit union play an outsized role in lending to small businesses. This relationship between the entrepreneur and the small financial institution is instrumental,” said Chairman Chabot.
Chabot continued, “When the mortgage meltdown in the mid-to-late 2000s triggered a financial crisis, these small financial institutions did not play a significant role in the crash. However, as a result of the crisis, Congress enacted the Dodd-Frank law, which was intended to improve oversight of the nation’s largest banks. Unfortunately, many of these requirements and regulations have trickled down to the nation’s smallest financial institutions. A one-size-fits-all regulatory framework is not sustainable for America’s smallest businesses.”
GAO Report Confirms Regulations Are Impacting Small Financial Institutions
“Institution representatives told us they found these regulations were time-consuming and costly to comply with because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific time frames. For example, among the 28 community banks and credit unions whose representatives commented on HMDA (Home Mortgage Disclosure Act)-required reporting in our focus groups, 61 percent noted having to conduct additional HMDA-related training,” said Michael Clements, Director of Financial Markets and Community Investment of GAO in Washington, D.C.
Clements continued, “Representatives in all of our focus groups and many of our interviews said that the TRID (the Truth in Lending Act and the Real Estate Settlement Procedures Act) have increased the time their staff spends on compliance, increased the cost of providing mortgage lending services, and delayed the completion of mortgages for customers.”
The Committee on Small Business will continue to study the impact of regulations on small businesses and our economy, and problems outlined in the GAO report.